The Market for Domestic Olive Oil

Alan Greene

A Greene Idea alangreene@surewest.net

Today’s Focus

Quick history of olive oil in California Description of the US Market & Pricing Converting the harvest to cash A suggested approach for Georgia

Once upon a time…. 1700s Missionaries

1880s Early industry

1970s San Francisco Good Food Movement

1980s Some money being made

1998 SHD

2004 Crop Survey 6,500 & 389,000

2006 Major SHD plantings begin

SHD vs. Traditional Show me the money.. Grow olives for oil because it is fun

THIS is how it should taste, so you must like it too

It’s more romantic this way

Ignore the data because this is how “they” do it

Milling olives for oil is an “Art”

0

50

100

150

200

250

300USA Olive Oil Consumption

USA Olive OilConsumption

1,000 of tons

EVOO

Refined OO

Pomace OO

Olive oil imports by quality grade

73,000,000+ Gallons

Bulk

Bottled

Imports by package

Retail

Food Service

Industrial

Major channel volume

SuperMkt

Box

Gourmet Internet Other

Key retail distribution channels

Pourable Oils A C Nielsen – Vegetable, Corn, Canola, Peanut,

Sesame, Soybeans, and Olive

Size Volume 1.08 Billion Gallons Dollars 1.76 Billion Dollars

2008 Avg price of competing oils: Vegetable oil = $.06 per oz Corn oil = $.065 per oz Canola = $.10 per oz Olive Oil = $.31 per oz

Source NAOOA

Adds 40% 35% 35%

500ml on Shelf Price

Distributor Price to Retailer

Price to Distributor

Production cost to Producer

Marketing Money

Packing Materials

Processor Bulk Oil Value

$ 8.34 $ 5.96 $ 4.31 $ 3.12 $ 0.50 $ 0.78 $ 13.93

$ 9.22 $ 6.59 $ 4.78 $ 3.47 $ 0.50 $ 0.78 $ 16.55

$ 9.71 $ 6.94 $ 5.04 $ 3.66 $ 0.50 $ 0.78 $ 18.00

$ 10.39 $ 7.42 $ 5.39 $ 3.92 $ 0.50 $ 0.78 $ 20.00

$ 11.06 $ 7.90 $ 5.75 $ 4.19 $ 0.50 $ 0.78 $ 22.00

Ex Spain per Kg $ per Kg $per gal

April 11, 2008 Current € 2.55 $ 4.04 $ 13.926

Basic Economics of Retail Competition with Imported EVOO

$-

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

$18.00500ml on Shelf Price

500ml on Shelf Price

Consumer expectation for “Extra Virgin”

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

Average price per gallon by channel

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

Average price per liter by channel

California OO Production

-

100,000.00

200,000.00

300,000.00

400,000.00

500,000.00

600,000.00

96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08

OO Gallons

OO Gallons

90% EVOO?

Year Acres 2011 100 2012 500 2013 500 2014 2,000 2015 2,000 2016 4,000 2017 4,000 2018 4,000 2019 4,000 2020 4,000 2021 4,000 2022 4,000

Georgia, how big, how fast?

110 150 250 750 1,250

3,250

5,250

9,250

13,250

17,250

21,250

25,250

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Acres Producing

Acres Planted

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000OO Gal Per Year

OO Gal / Acres

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

2011 2012 2013 2014 2015 2016 2017 2018

OO Gal Per Year

OO Gal Per Year

Future Impacts on Pricing 2014 – price/production EU subsidy to Spanish and

Italian olive industry. Loss of $1 per gallon to $1/Lt to the grower/miller

Very weak Spanish and Italian economies

Failure to maintain existing orchards

Water shortages

China and India

Increasing enforcement of quality standards and food safety requirements

Road to market Sell fruit to a miller Sell oil to miller / packer Process to oil, sell and market Contract with a miller Build a mill

Sell the olives to a miller

Payment per ton – market price

Fixed agreement to buy or…

Sell oil to a miller Multi year agreements are common Payment determined by oil yield and quality At least 3 payment programs:

1. Fixed price per gallon +

2. Guaranteed minimum price + % of average sell price

3. Charge against sales price for milling, processing, and storage plus a marketing fee.

Payment spread over crop year

Market & sell the oil yourself 1. Build a mill or contract with a custom miller 2. Arrange for packaging and storage 3. Develop marketing and sales strategy for your oil 4. Build a relationship with channel participants and

customers 5. Deliver or ship oil to customer 6. Invoice or charge customer 7. Collect on invoices 8. Respond to customer needs or complaints

20 tons of fruit 760 gallons 479 cases 5,748 bottles

2,280 gallons 1,438 cases 17,256 bottles

38 gallons per ton Case of 12, 500ml bottles

26

Presenter

Presentation Notes

7 ton and 9 ton systems side by side

Presenter

Presentation Notes

High speed bottling line

Milling considerations Is the mill’s capacity a fit for your orchard

What are the quality standards for the fruit

How is the milling schedule determined

What are the cleaning procedures between batches or production shifts

What are the storage options and how well is the finished oil protected

Payment

Georgia EVOO Market Strengths Local to established upper end food markets;

Atlanta, Albany, Charlotte, Raleigh, Savannah, Charleston, Orlando, Tampa

Local to East Coast Markets: New York, Washington DC, Boston, Philadelphia, etc.

Local Grown, Product of the USA, Healthy, Fresh, Great Taste.

Lower freight cost to East Coast vs everyone.

Maybe first to market with fresh oil?

Planning Volume

13,200 24,000

42,000

106,000

190,000

- 20,000 40,000 60,000 80,000

100,000 120,000 140,000 160,000 180,000 200,000

2011 2012 2013 2014 2015

GA Marketable EVOO

GA Marketable EVOO

Early Targets High end restaurants in media visible markets

Golf and vacation resorts

Cruse lines

Specialty Food markets with less than 5 stores

Metropolitan Farmers Markets

SAMPLE DINNER MENU April 6, 2011

Northern California Artisan Olive Oil Tasting

Hillstone A/K Blend (Yolo) / Hillstone Split Rock (Yolo) / Frate Sole (Woodland) 6

MARINATED • CURED • CRISPY • CRUDO •Bowl of Marinated Olives grilled trigo fuerte flatbread / marinated north valley chèvre 8

•Pacific Ahi Tuna & Steelhead Tartare mandarin / spicy soy-ginger sauce / cilantro 13

•Charcuterie Plate la quercia prosciutto / rabbit rilletes / lardo / pancetta tesa / house pickles 15

•Fritto Misto monterey bay calamari / white fish / onions / lemon / caper aïoli 13

Chef Michael Tuohy Murphy's restaurant

Atlanta, GA

Questions

Alan Greene A Greene Idea

alangreene@surewest.net